A SERVICE AGREEMENT between state-run MTNL and BSNL will enable the former to take debt from the latter for maintenance of its assets in the form of inter-corporate debt (ICD).
The agreement is part of the arrangement wherein MTNL's telecom services in Delhi and Mumbai circle will be run by BSNL, which does not provide services in these two circles.
MTNL's revenue and Ebitda (earnings before interest, taxes, depreciation, and amortisation) have been declining over several years and the telco has consequently defaulted in repayment of its debts and liabilities.
With the BSNL service agreement, the government wants to operate MTNL on an Ebitda-neutral basis.
Analysts, however, said the success of such a structure is dependent on the success of 4G and 5G in Delhi and user wins.
Even for maintaining MTNL's assets, BSNL, which is also loss-making, may face financial strain if it has to repeatedly step in, especially if MTNL's losses continue over the long term, analysts said.
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